Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


Portfolio Lending Strategy and Banks Performance in Jordan: What to Do?

Author(s): Bashar Abu Khalaf, Sami Alajlani

This empirical investigation examines the impact of loan diversification; individual lending, mortgage lending, small-medium sized enterprises lending, government lending and corporate lending, in addition to bank size on Jordanian commercial banks performance. Thirteen commercial banks in Jordan used for the time period 2000-2018 applying Seemingly Unrelated Regression (SUR). The data was collected from central bank of Jordan website and the different websites for the relevant banks. The results indicate that loan diversification does impact Jordanian commercial banks performance. In particular, individual lending, corporate lending & mortgage lending have positive impact on banks performance, while the SMEs lending and government lending have negative impact on performance. The study recommends that banks must focus on lending sectors that positively affect its profitability such as mortgage lending, individual lending and corporate lending. Thus, the strategy that Jordanian banks should follow is to concentrate more on mortgage lending, individual lending then corporate lending in order to increase their performance.

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